My budget will not be your budget or my brothers budget. Budgets change month to month believe it or not. Yes your house payment will be the same month after month, day care same. Birthdays, anniversaries, car licensing those are only once a year events. I get that not everyone is married you’re off the hook on that one. Most of us have a car whether you have a payment or you own it out right you still pay for plates on the car. You may pay taxes in around April 15 conveniently that is also once a year or quarterly for small businesses. Your savings needs to be on that budget, you need to have a life happens account.
I recommend $1000 or whatever your either auto insurance or home owners insurance deductible may be. Why that? Because you will always have your self covered if you need anything. There are a couple schools of thought on the what do I do with the money. Here is the long story short, savings accounts don’t pay well. Especially with just a $1000 in it. I say just $1000 like it’s nothing. Farthest thing from it I know how long it can take to save the first $1000, but I know that if I’m in an accident and I need $1000 to start to get my car fixed so I can get my butt to work everyday. I’m going to be glad that I have that money. Here is where I differ from the “experts” I would say to put $1070 in a CD. What? A CD? How old are you? Yep a CD at you local bank. Maybe not even your primary bank? You need this to be your first emergency fund. Car accident, hail storm, slip and fall fund. If that happens and you have to get to it won’t it be nice to not have to worry about how am I/we go to pay for this. A CD keeps you from spending it on we need a night out “emergency” Still liquid at any bank you simply walk in tell them you want to cash out your 60 month CD you will pay the penalty of 6 months worth of interest. Which is why you funded the CD with $1070. You can set the interest to be drawn on annual basis so everything you have earned in the last 12 months is a bonus.Not a huge bonus and hey it will help with some of your other debits. The little bit of extra money has taken care of the penalty itself. If you leave the money in for more than 6 months you are money ahead of the savings account paying you .20% interest. (Don’t quote me on the rate)
You will start saving in a standard savings account until you hit $1070 then take that money and open the CD. Once you have accomplished this goal check it off of the list of goals you have for your self. Here is where I do agree with the “Volunteer” you have to give your money a mission. If you have a plan in place you know where all of your money is going every month where if you just expect that your direct deposit to be there you will at some point through out the year wonder where did all of out money go?
Here is the list of the most important items on your budget
-Food
-House
-Utilities
-Car
Everything past that is a layer of want and desire, you can not live without these things in the reverse order. Hey your car beaks down and you are now on the bus or bicycle at least you still have lights on at home, heat in the winter and cool in the summer. Next to go is the utilities, if it is a difference of not running your air conditioner below 80 degrees because the bill is too high that is what it is. Then the house if you stop paying your mortgage or rent believe me it won’t take long till you are getting hate mail from the mortgage company or notice from your landlord. Then you are on the street my friend. Lastly food, on your budget first is always food. I’m not talking about the surf and turf special at the most expensive restaurant in America. I’m talking Spam and Ramen. By the way there is nothing wrong with a Spam sandwich I eat them every summer instead of BLT we do SLT’s.
“A goal without a plan is just a wish.” Antoine de Saint-Exupéry
If your goal is to be debt free what is your plan? Is it written down or are you just wishing on day you may be debt free?